Cut 8 to pump P80bn into Govt coffers

Brian Benza
Staff Writer | Friday October 22, 2010 00:00

 

Debswana officials revealed during a media tour of the project this week that the expansion will produce 102 million carats worth US$15 billion (P100 billion).

This will see Government harvest an estimated US$12 billion (P80 billion) from the project which will cost Debswana shareholders, the government and De Beers US$3 billion in the next 14 years.

Roughly 80 percent of income generated by Debswana goes into national coffers through royalties, taxes and dividends. Between 2000 and 2009, the government received 137 billion from its partnership activities with De Beers.

Barring an envisaged second dip in the global economy, the P80 million could rise significantly as diamond prices are expected to rise by between 60 and 70 percent in the next couple of years.

The current mining operation at Jwaneng is scheduled to be depleted by 2017, hence Cut 8, a 'stay in business project' which will prolong the mine life to 2024.

Speaking to Business Week during a  tour of the mine this week, General Manager of Projects, Planning and Technical Services, Steve Axcell, said the US$3 billion to be spent on expanding the mine over the next 14 years will prolong the mine's life span by seven years, producing supply worth approximately US$15 billion.

The Cut 8 project, which started late last year, will see Jwaneng Mine double its depth to around 650 metres, giving it a 'super pit' status. Jwaneng contributes 70 percent of Debswana income.

'The US$3 billion costs of the expansion will be shared equally between the shareholders,' said Axcell. 'Our estimates are that we should recover supply worth at least US$15 billion.

'Construction of the mine, which involves moving some crushers and conveyer belts to make way for Cut 8, is about 20 percent done and it should be completed by the end of next year.'

But Cut 8 will only start producing diamonds in six years' time as the company expects to reach the expansion project's 91 million tonnes of ore only around 2016 after removing 658 million tonnes of waste material at approximately 110 million tonnes per year.

Bothakga Burrow and Basil Read have already started waste mining. So far, about 10 million tonnes of waste material has been mined while another 10 million is to be mined by the end of the year. Basil Read is a JSE-listed company.

Axcell said they would seek advice and assistance from international experts to help with the huge tonnages involved in the project.

They have already ordered extra equipment and machinery, including 37 new 300-tonne super trucks worth US$3 million each on top of the 27, 240-tonne trucks already in use.

The expansion has also seen the company employ an extra full time 900 people specifically for the project, while its fuel consumption is set to go up from 28 million litres a year to 100 million litres a year.

Apart from Cut 8, two further cuts are being eyed to further enlarge the size of the Jwaneng pit and deepen it to 850m, which is estimated to be the financial limit of the open-cast operation. Jwaneng Mine GM, Balisi Bonyongo, said the company is also looking at another extension project, Cut 9, to prolong the mine by another four to five years, although the feasibility study of that project has not been completed.

'We are still looking at the possibility of Cut 9 which could give us a maximum of five years,' Bonyongo said. 'But a decision has not been made yet as there is also the option of going underground.

'We are still trying to balance the trade-off between Cut 9 and going underground. A decision will only be made around 2012/13.'

The expanded open pit would have the capacity to deliver at least 10 million tonnes of ore while an underground mine is estimated to deliver a maximum of four million tonnes a year. It is envisaged a smaller Cut 10 will mark the final opencast extension. But even with the two extra cuts, the life of the opencast mine should end in about 2030.